Jakarta – President Jokowi’s decision to cancel the plan to revoke the coal Domestic Market Obligation (DMO) obligation has at least dampened public upheaval in the past week. This noise was triggered by the Coordinating Minister (Menko) for Maritime Affairs, Luhut Binsar Pandjaitan (LBP), who stated that the government would revoke the DMO obligation policy for coal industry players.
According to LBP, it is not only the obligation to fulfill the quota of 25% of domestic coal sales revoked, but it also includes the transfer of the DMO price of coal to the market mechanism to save state finances. In return, coal companies will be subject to export fees of US $ 2-US $ 3 per tonne, which will be managed by an institution as applied to the palm oil industry.
The Indonesian Publish What You Pay (PWYP) Coalition considers President Jokowi’s statement to only reduce the momentary noise caused by public pressure. There are still efforts from the parties to re-issue the issue of withdrawing this DMO policy. For example, the Coordinating Minister for the Economic Darmin Nasution said that the plan to cancel the DMO rule withdrawal is still in the evaluation stage and has not been decided yet. Alternatively, even the statement of the Coordinating Minister for LBP, who will continue to review the withdrawal of the DMO policy and see opportunities for implementation next year.
The PWYP Indonesia Coalition urges the government to continue to be consistent with the coal DMO obligation policy. Apart from being consistent with the mandate of Law Number 4 of 2009 concerning Mineral and Coal Mining (Minerba Law). The DMO’s obligation is NOT solely to meet the demand for coal supply for the State Electricity Company (PLN) or to save PLN’s finances. However, more prominent than that, the DMO coal obligation policy is an effort to control coal production, which has been exploited indefinitely for decades. Controlling or reducing coal production is needed to achieve the energy mix target while considering the decreasing environmental carrying capacity, increasing greenhouse gas emissions, and part of the strategy to maintain a balance of resources.
State Electricity Company (PLN) expenses
The elimination of the special DMO coal price will increase the State Electricity Company (PLN)by at least 4.2 billion USD or 58 trillion rupiah. This expense arises from the difference between the DMO special price (70 USD) and the July reference coal price (104.65 USD). Even though business actors will be subject to 2-3 USD export fees in exchange, this fee has not covered the State Electricity Company (PLN)’s a burden. Using the maximum tariff and an additional 100 million tons as discussed by the Minister of LBP and assuming that all business actors fulfill this financial obligation, the export contribution collected is only 1.39 billion USD or 19.47 trillion rupiahs. So that State Electricity Company (PLN)will still be burdened by 2.8 billion USD or 39 trillion rupiah.
Coal Industry Governance Is Still Poor
PWYP Indonesia continues to remind the government not to make policies that trigger massive coal exploitation in Indonesia. Instead of opening wide the door to coal exports, the government should improve the coal industry’s governance. It starts from 710 Mining License (IUP) with non-clean and clear status (March 2018). There are still accounts receivable from mining business actors (Coal and Mineral) against Non-Tax State Revenues (PNBP) that have not been resolved. The value reaches IDR 4.5 trillion (July 2018), 631,000 hectares of coal concessions in protected forest areas, and 212,000 hectares of coal concessions in conservation forest areas (December 2016). Also, low compliance of business actors in placing reclamation and post-mining guarantee funds, where only 60% of the total Coal and Mineral Mining License have placed reclamation guarantee funds and only 14% have placed post-mining guarantee funds (June 2018).
The plan’s cancellation to revoke the DMO coal obligation policy became a momentum to continue evaluating coal industry players regarding DMO obligations. PWYP Indonesia encourages the government to dare to impose strict sanctions for business actors who fail to fulfill their DMO obligations.
“Over Incentives” for Coal Entrepreneurs
The coal industry has received too many incentives from the government. Throughout 2018 alone, several incentives were enjoyed by coal entrepreneurs. First, the increase in the coal production target in 2018 is 5% from the 2017 RKAB, which is around 485 million tons. This violates the 2015-2019 National Medium-Term Development Plan (RPJMN), which sets coal production at 406 million tons in 2018, and the National Energy General Plan (RUEN), which mandates a maximum production limit of 400 million tons in 2019. Second, the postponement implementation of MOT 48/2018 concerning Provisions for the Use of Sea Transportation and National Insurance for the Export and Import of Certain Goods, which regulates the obligation to use national insurance in coal and crude palm oil export activities until February 1, 2019. Previously, coal entrepreneurs also enjoyed postponing the obligation to use ships from May 1, 2018, to August 1, 2020.
The Myth of Coal Saves State Revenue
The Coordinating Minister for Maritime Affairs, LBP, revealed that withdrawing the DMO obligation is needed to save state revenues because it will get additional state revenue of US $ 3.68 billion. However, compared to Bank Indonesia’s data, which shows a balance of payments deficit in 2018 of US $ 25 billion, the figure of US $ 3.68 billion is still tiny. If the government wants to increase state revenue from coal, it does not give new permits or open export doors. The governance of the coal industry, including the state revenue system, must be improved.
Indonesia’s 2016 Extractive Industries Transparency Initiative (EITI) data shows that out of the thousands of Mineral and Coal (Minerba) Mining Business Permits (IUP) registered at the Ministry of Energy and Mineral Resources. Only 1654 mining licenses make payments for Non-Tax State Revenue (PNBP). Of the 100% PNBP revenue (1654 licenses), it turns out that only 112 companies contributed 94% of it. The question is, how come? Thousands of Coal and Mineral Mining Licenses in Indonesia, in fact, only contribute no more than 6% of the total PNBP Minerba.
Concept of Raw Coal Funds Levies
The plan to revoke the coal DMO policy is followed by a discourse on forming a new institution to manage export fees of US $ 2-US $ 3 per ton as applied to the palm oil industry. However, the government cannot explain the objectives and legal umbrella, the institutional model and mechanism, and who will be the beneficiaries of these contributions.
The government should reflect on the governance problems faced by the Oil Palm Plantation Fund Management Agency (BPDPKS). The 2016 Corruption Eradication Commission (KPK) study on BPDPKS found three main problems, namely the export verification system was not running well; The use of funds from oil palm plantations is used up for the biofuel subsidy program, and three business groups are the primary beneficiaries of the oil palm plantation funds.
The problem of verifying export data is also found in the coal sector differences in export data between agencies such as the Ministry of Energy and Mineral Resources – Ministry of Trade – Customs and coal importing countries. The Indonesia Corruption Watch (ICW) study shows a finding of potential state losses of Rp. 133 trillion due to alleged unreported transactions from coal exports during the 2006-2016 period by looking at the gap between Indonesia’s data and importing countries. PWYP Indonesia is also concerned that the coal collection agency model, which is still very raw, will become a new rent-seeker field.